Bloomington’s SkyWater Technology nets $16M in federal funds to increase semiconductor production

Semiconductor manufacturer SkyWater Technology will receive up to $16 million in federal funding to upgrade its Bloomington plant, yet another Minnesota business tapped to help increase domestic production of the critical technology.

Officials announced the aid as part of a preliminary agreement with the U.S. Department of Commerce under the CHIPS and Science Act, which was passed in 2022 to strengthen the nation’s semiconductor industry and supply chains.

Bloomington-based SkyWater will use $127 million, including $19 million in matching state funds, through the next five years to improve its infrastructure and cybersecurity systems, among other upgrades, CEO Thomas Sonderman said during a news conference Friday at the company’s headquarters.

The funding will enable SkyWater to increase its production capacity by 30% and create an estimated 70 jobs, he said. The company’s semiconductors are parts of cutting-edge technologies in computing, biomedical and thermal imaging.

“With these awards, we’re enhancing our capabilities to invest in the future,” Sonderman said. “SkyWater is helping to strengthen U.S. supply chains, develop new technologies and create a resilient infrastructure that supports both national security and commercial progress.

Congress passed the CHIPS Act in an attempt to combat China’s efforts to dominate the global semiconductor market, a prospect that policymakers fear could jeopardize national security and the economy. The U.S. now accounts for 12% of global chip manufacturing, down from 37% in 1990.

Besides billions of dollars in direct aid to manufacturers, the legislation offers a 25% tax credit to companies that invest in chip plants in the U.S., which officials said SkyWater plans to claim.

SkyWater this year halted plans to build a $1.8 billion semiconductor production and research facility in Indiana, a project that had sought CHIPS support. At the time, the company cited concerns in its earnings report over potential financial and operational risks.

A month later in May, Bloomington-based Polar Semiconductor received $120 million in CHIPS funding for an expansion.

U.S. Sen. Amy Klobuchar, who worked on the CHIPS Act as a senior Democrat on the Senate Committee on Commerce, Science and Transportation, said several other Minnesota companies have applied for funding. As President Joe Biden’s tenure at the White House winds down, she said, she is unsure which firms — if any — could be next in line for direct aid.

“This is a major win for Minnesota, once again,” Klobuchar said. “But we also know that we can expand. And that we shouldn’t just be thinking tech in California and tech in New York. We should also be thinking Minnesota.”

When Biden announced the bill, she added, he held a chip from SkyWater.

Sonderman said the funding will complement more than $320 million in ongoing facility and equipment upgrades planned through 2026. The company expanded its facility in 2020 with the help of a $170 million grant from the Department of Defense to boost production of chips for the military.

Control Data, one of the nation’s leading makers of midrange and mainframe computers and Minnesota’s dominant technology firm for decades, built SkyWater’s plant in the 1980s. It later sold the facility to Cypress Semiconductor, which sold it to the private investors; they formed SkyWater in 2017.

Since then, the company has grown from 280 employees to more than 700 and was listed as a publicly traded firm in 2021.

The Commerce Department announced two other awards Friday, both to companies in Texas. Coherent will receive up to $33 million to modernize its facility in Sherman, and X-Fab will get up to $50 million to improve and expand its silicon carbide plant in Lubbock.

“The Biden-Harris administration’s bipartisan CHIPS and Science Act is making targeted investments to meet market demands for technology critical to our national and economic security,” Commerce Secretary Gina Raimondo said in a statement.

“Today’s proposed investments across Texas and Minnesota would help bolster domestic chip production and help secure our supply chain for decades to come.”